Angus King: Rethinking Free Trade

Angus King H’07, a distinguished lecturer at the College since 2004, is a regular contributor to the Bowdoin Daily Sun. In his latest post, the former two-term governor of Maine argues that free trade isn’t all that it’s cracked up to be.

Imagine the governor of one of our states going to the Congress and making the following argument:

“We are a small state that is struggling economically; we’re predominantly rural and would like to expand our manufacturing base. But it’s hard because we’re subject to those onerous federal environmental laws, which make building factories more expensive, as well as those pesky federal safety and wage and hour laws, which drive up the cost of labor.

“So we would appreciate it if you would exempt us from all those laws; then, we could attract jobs from the rest of the U.S. and sell our products for less than what they would cost to make in the other states. Consumers in the other states would get cheaper goods and we’d get lots of new jobs. And maybe, eventually, our economy will improve to the point where we can buy stuff from the other states as well. So how about it?”

Sound preposterous? Absolutely; the guy would be laughed out of Congress and not even get through the door at the White House. And yet, this is essentially what happens when we sign a free trade agreement with another country, especially one with minimal environmental and labor laws. In terms of trade and access to our markets they are, in effect, becoming states—no tariffs, no borders, no hassles—but very special states, indeed, exempt from the rules that apply to their competitors unlucky enough to still be located in one of the original 50.

…what have been the results of this deal over the past couple of decades? Nothing less than the hollowing out of the American economy.

Pretty nice deal—rights (including access to the richest market in the world) without responsibilities.

And what have been the results of this deal over the past couple of decades? Nothing less than the hollowing out of the American economy. It now appears that the financial boom of the nineties was largely fake—little real value was created (but a lot of people got very rich without producing anything)—and it papered over (literally, in many cases) the real story of the last twenty years, which is the stunning decline in U.S. manufacturing. Between 2001 and 2009, we lost over 42,000 factories (you read that right, it’s factories) and more than five and a half million manufacturing jobs, representing an amazing 32% decline in manufacturing employment in less than a decade.

Obviously, this isn’t just about trade. Technology itself, for example, eliminates jobs by making workers more productive. But it’s hard to argue that trade policy didn’t have a lot to do with it when the identical products that were once made here are now made offshore, often under the same label. Just here in Maine, Hathaway Shirt, Cole Haan, Bass and Dexter shoes, as well as countless small wood processing mills come easily to mind.

This came home to me in less abstract terms the day I went to the closing of the Hathaway Shirt factory in Waterville. (I always felt that if I got to go to the celebrations—ribbon-cuttings and such—I should also go on the not-so-fun days as well). After reassuring the workers that we would provide training and transition support and that better opportunities were around the corner, I went down the line of the soon-to-be-jobless workers shaking hands. Most were downcast but reasonably cordial, until I got to one woman toward the end of the line. She refused my offered hand, looked me in the eye and said, “Why should I shake hands with someone who let them ship my job away?”

I had no good answer, and I still don’t.

The classical concept of open markets and free trade makes perfect sense between societies on more or less the same political, economic and social level—the U.S. and Canada, Germany and France, the UK and Denmark. Healthy competition will make businesses in each country more creative and productive and consumers in each country will gain the benefit of the efficiency and productivity engendered by the competition. But all those countries share a baseline of rules, assumptions, and economic expectations so the competition is all about productivity, not who can have the lowest environmental standards or labor costs.

(By the way, this is why the no-federal-regulation-of-anything philosophy that is emerging in the Republican presidential campaign is so dangerous. It’s my opening case multiplied by 50—and the race to the bottom among states (all in the name of being “business-friendly”) would make your head spin. “Wetland laws in Vermont slowing your construction plans? Come on down to Texas and get your permits before you even apply!” I have first-hand knowledge here; I vetoed increases in Maine’s minimum wage laws more than once out of concern that if we were substantially above the national baseline, it would add to the perception that we were anti-business. In other words, the pressure is already there; take away the nationwide standards that form a floor on environmental and labor issues and it will be “Back to the Future”—fifteen years from now will look more like 1920 than anything we’ve experienced in our lifetimes.)

A one-third decline in manufacturing jobs in eight years ain’t evolution, it’s revolution and a most unpleasant one at that.

Now, I understand that protectionism is generally not a good idea and that the Smoot-Hawley Tariff contributed to the severity of the Great Depression. I also know that businesses move and seek lower cost locales wherever possible and had been doing so long before NAFTA and the admission of China to the WTO (the empty mills in New England pre-date both), but two things make the current situation different: time and the living standards gap between us and our new trading partners.

By time, I mean the acceleration of the time it takes for major economic changes to take place. The shift of textiles, shoes and furniture from New England to the American south took a couple of generations, from the late forties to the late nineties. This gave individuals, communities and the region time to adjust while the changes took place. Now, the changes are much more abrupt—the economy of a whole town or region wiped out in matter of months or a few years instead a more gradual change over decades. A one-third decline in manufacturing jobs in eight years ain’t evolution, it’s revolution and a most unpleasant one at that.

The second difference between the current situation and historical trends is the vast gap between the laws and expectations of industrialized countries and those of the desperate-to-catch-up third world. Environmental protection costs money; keeping workers safe costs money; paying workers a wage sufficient to survive economically in our economy costs money—and there is simply no way our manufacturers can compete over the long run with their counterparts (often other U.S. companies) in places where these costs are either minimal or non-existent.

I remember being approached by a Maine manufacturer of tools who wanted me to understand why he had outsourced one of the parts of his product to China. “Most people don’t understand the cost difference,” he said. “Here, the part costs me about $14.00. Having it made there, the identical part is about $3.50, delivered.” I literally felt a cold shiver pass through me, and subsequent events haven’t made it feel much better.

I’m convinced that one of the reasons this keeps happening is that our media and political elites are physically located in places largely immune to the real impacts of this reverse tidal wave. They literally don’t see it. If the Congress met in Dayton, Ohio, or Schenectady or Wilton, Maine, or any one of thousands of struggling towns scattered throughout the country, I suspect they would be much more reluctant to let this happen without more of a fight.

So should we slap high tariffs on imported goods or quotas to restrict what comes in? Probably too late for that in most cases—and the result would be an immediate increase in prices which probably wouldn’t be the best thing as we struggle to get out of the recession we’ve been in off and on for the past ten years. But as we talk about new deals and the renewal of old ones, I think we should be much more aggressive about the price of admission to our markets—some measurable progress on environmental laws (do you have clean air and water standards or not?), real labor protections, and respect for intellectual property would be a good place to start.

We wouldn’t let Maine or Mississippi duck the standards; why should Colombia get a pass?

Bravo Angus! I still remember fondly those many trade missions to Canada that I took with you, when you were a trade-promoting governor.

You were definitely one of the few elected officials I’ve ever run into who understands the nitty gritty part of foreign trade, and therefore one of the few entitled to challenge the prevailing Economics 101 fantasy that Free trade in and of itself is a beneficial thing. Too many of our trading partners are shrewdly mercantilist and protectionist and much better at evading the terms of GTO rules and bilateral trade treaties than we are at enforcing them. I remember Bill Cohen voting against NAFTA because he saw that it would not be enforced in a way that would protect Maine businesses and workers. And he was right. Perhaps we need to look more closely at the example of the European Union which, on average, has higher costs and more stringent labor and environmental regulations than we do, but still have a trade surplus and less severe trade-related social problems despite wider development differences than we have here in the US.

Anyway, I’m glad to see you weighing in on this, Angus, because I gotten so concerned by this issue that I will be doing a “rant” on the subject in five Maine venues as part of the Camden Conference’s community events program leading up to the 2012 Conference dealing with “The US in a 21st Century World; Do we have What It Takes?”. (At present, our economy and foreign trade do not seem to “have what it takes”; but I think they could, dammit!) I will be quoteing your “Rethinking Free Trade” comments in my own lectures on the subject. Keep up the good work!

Angus;
Well written and equally well thought out Where do you find the time for such projects? Well fortunately you are addressing an issue that truly has affected maine probally much more than any other Region. Now Charlie certainly you surely recall when H Ross Perot made his now infamous remark during the Cnn Sponsored debate with Al Gore there will be ‘A Giant Sucking Sound’ as the Jobs leave America’ let’s sy a prayer fro Frankn Akers and ask Bill Clinton just what was the benefit of ‘NAFTA’

Thank you, Mr. King, for this compassionate and rational stance. Above all, do not allow the sinister “fast track” vote on this before the information is released IN FULL to both all of Congress AND to the American people. Just the fact that it is all being negotiated in the type of secrecy appropriate for early nuclear research makes it unpalatable. What are they hiding? So, my urgent request is to organize against “fast track” and then, based on everything you have said above, vote a resounding NO on the proposal. I hope you will send your analysis, if you haven’t, to major media here in Maine.

Thank you, Senator King for your thoughtful response to my letter and link to your 2011 letter on the topic of Free Trade, esp. regarding TPP issue. The topic worries me sick because I’m old enough now in my late 70’s to have seen a lot and I’ve been paying attention going all the way back to WW II. My family would gather around the dinner table on our subsistence farm in CT and talk politics, mostly -because that’s what was hurting us, mostly.

In my humble opinion, most of the decisions that have hurt us most in the 70 yr duration were decided and implemented at the instigation of corporate profiteering. There is nothing that I can detect in the current TPP and related “Free Trade” initiatives that is based on the well-being of humanity. In fact, humanity is a minor consideration at best and it’s getting worse while corporate spin-doctors flood our corporate media with b.s. to confuse, deceive and delude us to act against our own best interests -if we choose to act at all.

Senator King, Sharon and I greatly admire your crisp, clear prose and no-nonsense demeanor. Our most urgent hope is that you will join with the several others of similar strengths and inclinations to halt the spiral to oblivion we seem to be trapped in. We’ll be watching and doing everything we can to support your collective efforts.
Most sincerely,
Seabury & Sharon Lyon
Bethel, ME 04217

Thank you, Senator King for your time and thoughtfulness in answering my letter. Your words here are exactly what should be heard on the floor of the senate, especially now as the TTP is trying to sneak its way past the American people.
We are Americans…. Our government is for us !! Not for corporations….corporations are not people ! What has and is happening is outrageous. it helps a handful of investors and a handful of executives… While the middle class dies. We are not spreading Democracy with these trade packs we are spreading Capitalism maybe but only in it’s worst form.. A Capitalism that eats itself. These CEO’s are like the Carpetbaggers of the old south. They would sell their mothers and their own children in order to take advantage of another countries resources including it’s people.
I would again suggest legal action as a ploy at least… Perhaps as a class action suit against corporations who trade US jobs for the advantage of having no environmental regs and cheap labor. That’s it the US Middle Class against the outsourcers ! Lost livelihood, lost homes, emotional distress, broken families etc… Maybe Bornstien and Bornstein could represent the corporations.

Thank you for this great article

I hope more senators find the courage to help you…and the rest of America..fight corporate control of our government !
I’m pretty sure it’s…”We the people” not “We the corporations” !!!!!!

Thanks for your response, great article. I worked in the telephone industry and finally worked myself out of a job, the technology I helped to get working didn’t need us anymore, at least not in the numbers we were. That’s big time productivity gain and I am happy to be one of the lucky ones who came in at the right time and had a lifetime job and now retirement. One of the sad results of “productivity” is that the gains go to a few “investors” and the displaced workers are left out. The promise of a “better life for all” from the technology revolution is not ringing true. I’m a 74 year old grandpa now and I really am concerned about the future for my grandchildren. I think back to Paul Erlich’s book, “The Population Bomb” and it seems that his predictions are ringing true. The pressure for the few to increase their “wealth” at the expense of the planet we share with our fellow humans and other critters is driving us into ruin. I don’t suppose a trade agreement that required minimum standards for source countries is in any way possible but improving conditions for workers around the world would go a long way toward making our own workers safer and more secure. I remember when the “greed is good” philosophy was coined. I’m not so sure that is working out for most of us. you have a really tough job, we all do. Lets hope we can work together to save ourselves. Lemmings must follow “leaders”???

Wonderfully well thought out and written. We should also insist on a carbon tax for the transportation. This should hit the Wall Street Journal. Sadly, it’s not only the city where our laws are made, it’s much more importantly the campaign contributions and other support that exploiters provide to their clients, our congressmen.

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